SACRAMENTO, CA — River City Bank (the Bank) reported net income of $7.3 million, or $4.97 per diluted share, for the quarter ending June 30, 2021, which compares favorably to the $6.1 million, or $4.20 per diluted share, for the same period in 2020. Net income was $23.0 million or $15.59 per diluted share for the six months ending June 30, 2021, which compares favorably to the $13.4 million or $9.96 per diluted share for the six months ending June 30, 2020. Significant items impacting quarterly net income for June 30, 2021 and 2020, include the following:
- Higher loan balances – Average loans outstandings were $211 million higher than the prior year quarter, thereby increasing net interest income.
- The provision for loan losses for the current quarter of $2.5 million was less than the $4.5 million for the prior year quarter.
- The Bank recorded an elevated level of prepayment premium income on commercial real estate loans that paid off prior to their maturity dates of $1.2 million for the quarter ending June 30, 2021 compared to only $140,000 for the prior year quarter.
- Mark-to-market losses (“MTM”) of $3.0 million and $1.3 million on interest rate swaps were recorded for the quarters ending June 30, 2021 and 2020, respectively. The Bank entered into these swap agreements to hedge the interest rate risk associated with its ongoing origination of medium-term fixed rate commercial real estate loans.
- Deferred loan fee income associated with Paycheck Protection Program (PPP) loans was lower in the current quarter with $1.4 million and $2.5 million for the quarters ending June 30, 2021 and 2020, respectively.
“We are very pleased with the $153 million of loan growth during the first half of the year after excluding the $118 million reduction in PPP loans,” said Steve Fleming, president and chief executive officer of River City Bank. “With vaccine distribution having ramped up and the California economy showing signs of improvement, we are optimistic about the near-term outlook for the Bank. We do, however, remain cautious about the impact to the office segment of commercial real estate due to the potential reduction in demand as employers provide work-from-home opportunities. Nevertheless, our asset quality remains strong with zero delinquencies and non-performing loans.”
“Operational efficiency remains a core competency for the Bank, as evidenced by our 31 percent efficiency ratio after excluding the swap MTM loss noted above for the quarter ending June 30, 2021” said Anker Christensen, chief financial officer of River City Bank. “Though our total non-interest expense increased over the prior year period, our focus on managing expenses continues to be evident by our continued low efficiency ratio.”
Shareholders’ equity for River City Bank on June 30, 2021 increased $20 million to $290 million, when compared to the $270 million as of December 31, 2020. The increase was driven by current year retained earnings, slightly offset by a $2.3 million decrease in accumulated other comprehensive income as the increase in short and medium-term interest rates resulted in unrealized losses in our investment securities portfolio. The Bank’s capital ratio remains well above the regulatory definition for being Well Capitalized with a Tier 1 Leverage Ratio of 8.5% as of June 30, 2021.